Seniors: No, You Cannot Keep Your Plan, Even If You Like It

Robert Book
, I analyze news and do research on health care policyOpinions expressed by Forbes Contributors are their own.

Image by AFP/Getty Images via @daylife

Both as a candidate and since taking office, President Obama has repeatedly promised that health care reform will have no downside for people who have health insurance and are satisfied with their plan, and in particular that Medicare for seniors will be protected. He famously said, “If you like your health care plan, you can keep your health care plan.” He has similarly promised to protect Medicare from cuts.

However, the health care reform law the President touted and signed into law does the exact opposite, on both counts. If you like your health plan, you most likely will not be able to keep it – especially if you're on Medicare. And even if you are one of the lucky few who can keep your health plan, your benefits will be cut so much that it will only be the same plan in name.

The broken promise to America's seniors comes about mainly through changes to the Medicare Advantage (MA) program. Medicare Advantage is the “private option” within Medicare in which private health insurers are paid a fixed monthly fee to provide at least the same minimum health benefits to their enrollees as “traditional” fee-for-service (FFS) Medicare. However, by delivering care more efficiently, most MA plans offer more benefits, often with lower co-pays and deductibles, and some provide a rebate on the normal Medicare Part B premium. Applicants for MA cannot be rejected, and they pay the same premium regardless of their age, sex, or pre-existing conditions. All Medicare beneficiaries have the right to select any MA plan offered in their area, and about 24 percent take advantage of this option – a percentage that has grown every year, and was projected to increase even further.

Regrettably, changes included in the so-called “Affordable Care Act” drastically cut payments to Medicare Advantage plans starting in 2013, driving many MA plans out of business, and forcing the surviving plans to slash benefits. According to a recent study I wrote with Michael Ramlet, these cuts will cause the beneficiaries in the average county (MA plans are offered on a county-level basis) to lose two-thirds of their MA plan choices by the time the new payment formula is fully phased in in 2017. Surviving MA plans will have to cut health care benefits, increase cost-sharing, or increase premiums (or some combination of these) to stay within the constraints imposed by the payment formula, making the program less beneficial to patients and thus further reducing enrollment.

From the beneficiaries' perspective, the cuts reduce the level of access to health care services by reducing the value of the MA plans that survive the cuts, and by eliminating desired MA plans, which forces some patients into the FFS system that they otherwise would have rejected. Overall, 50% of beneficiaries (7.4 million people), who would have been in MA plans will transition to the fee-for-service plan which they otherwise would have rejected as insufficient for their needs, and which itself will be the subject of only slightly less drastic cuts. The average beneficiary – considering both those who stay in the stripped-down MA program, and those who transition out of it – will incur an average cut of more than $3,700 in benefits per year by 2017.

The decline in both plan offerings and in enrollment will vary substantially across the country. In Texas, for example, beneficiaries will face an average loss of more than three quarters of plan offerings per county by 2017. Similarly, Louisiana will experience an average county percentage loss of 84% of MA plans by 2017. Lesser impacts are observed in other states, but even Arizona, the state experiencing the least degree of change, will experience an average 57.5% decrease.

There are also regional variations in the enrollment and benefit cuts. The percentage of beneficiaries pushed out of the program ranges from 38 percent in Montana to a 67 percent in Washington, D.C., and 84 percent in Puerto Rico. Average benefit losses range from a low of $2,780 in Montana to a high of $5,092 in Louisiana.

These cuts are substantial, real, and already enacted into law. If you are a Medicare beneficiary who has chosen a Medicare Advantage plan, you will probably not be able to keep it, no matter how much you like your plan. Even if you can keep your plan in name, the plan you like now will be a shell of its former self.